Australia shares edgy after slide to 5-mth low, keep wary watch on Greece

* Index hit lowest levels since January

* Invevestors waiting more news on Greece - analysts

* Buyers picking up bargains (Adds analysis, quotes, stocks on the move)

By Charlotte Greenfield and Gyles Beckford

SYDNEY/WELLINGTON, June 30 (Reuters) - Australian shares slumped to five months lows on Tuesday on jitters over a looming Greek debt default, but some buyers crept back into the market to pick up stocks on the cheap.

The S&P/ASX 200 index was down 0.17 percent, or 8.98 points, at 5411.200 by 0246 GMT, after earlier dropping to 5,390.500, the lowest level since January. The benchmark fell 2.22 percent for its third day of losses on Monday.

"Today we're just treading water. The market isn't overly excited about any improved prospect for Greece or the Eurozone at this stage but pushing back too much more might be over kill at this point," said Steven Daghlian, a market analyst at Commonwealth Securities.

Greece will not pay a 1.6 billon euro loan instalment due the International Monetary Fund on Tuesday, a Greek government official told Reuters, after talks between Athens and its creditors broke down over the weekend.

The financial and mining sectors led losses on Tuesday while the industrials and consumer staples ticked the winners ledger.

Iron ore miner Fortescue Metals Group Ltd fell as much as 2.6 percent after Australia cut its 2015 iron ore price forecast by 10 percent.

Qantas Airways Ltd jumped 2.1 percent after reporting a positive performance in May. For more individual stocks activity click on

A Reuters poll found Australia's benchmark stock index is expected to rise about 7 percent this year after barely moving the needle in 2014, and will rally by the middle of next year to a level not reached since before the global financial crisis.

New Zealand stocks pushed cautiously higher away from a five-month low hit the previous day as investors looked for some bargains after the previous session's sharp slide.

The benchmark NZX-50 share index was 0.4 percent higher at 5,727.34, with takeover action in the retail sector also boosting activity.

Attention was on outdoor goods and clothing company Kathmandu which surged 26.6 percent to a three-month high after homeware chain Briscoe Group said it had increased its stake to 19.9 percent.

Briscoe, which gained 2.1 percent, said it would make a cash and scrip takeover offer, likely to value Kathmandu at around NZ$360 million ($246.31 million)

Other retail stocks benefited with clothing retailer Hallenstein Glasson up 6.1 percent, discounter The Warehouse Group up 1.1 percent, and jewellery chain Michael Hill International (NZSE: MHI.NZ - news) rising 1 percent.

($1 = 1.3038 Australian dollars) (editing by Shri Navaratnam)